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The rejection of an independent cause of action for deepening insolvency does not

absolve directors of insolvent corporations of responsibility. Rather, it remits plaintiffs to

the contents of their traditional toolkit, which contains, among other things, causes of

action for breach of fiduciary duty and for fraud. The contours of these causes of action

have been carefully shaped by generations of experience, in order to balance the societal

interests in protecting investors and creditors against exploitation by directors and in

providing directors with sufficient insulation so that they can seek to create wealth

through the good faith pursuit of business strategies that involve a risk of failure. If a

plaintiff cannot state a claim that the directors of an insolvent corporation acted disloyally

or without due care in implementing a business strategy, it may not cure that deficiency

simply by alleging that the corporation became more insolvent as a result of the failed

strategy.

Moreover, the fact of insolvency does not render the concept of “deepening

insolvency” a more logical one than the concept of “shallowing profitability.” That is,

the mere fact that a business in the red gets redder when a business decision goes wrong

and a business in the black gets paler does not explain why the law should recognize an

independent cause of action based on the decline in enterprise value in the crimson

setting and not in the darker one. If in either setting the directors remain responsible to

exercise their business judgment considering the company’s business context, then the

appropriate tool to examine the conduct of the directors is the traditional fiduciary duty

ruler. No doubt the fact of insolvency might weigh heavily in a court’s analysis of, for

example, whether the board acted with fidelity and care in deciding to undertake more

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